CFA Society Singapore
LONDON (May 12): The yen fell on Thursday as investors sold the currency amid speculation that the Bank of Japan could decide to expand its monetary stimulus as soon as next month.
Talk of more action gathered pace after prominent Japanese academic Takatoshi Ito said the BOJ is likely to expand monetary stimulus either in June or July. Ito is said to have close ties to Governor Haruhiko Kuroda.
For his part, Kuroda said the BOJ won't hesitate to take further easing steps if necessary, adding that there were still large downside risks to Japan's economy. The BOJ introduced negative rates earlier this year, but that has had little impact on the yen or economic data, so far, analysts say.
The US dollar rose 0.5% to 108.97 yen, recovering from a 18-month low of 105.55 yen on May 3, after the BOJ held off from expanding its monetary stimulus at its policy meeting in late April.
Traders have been cutting favorable bets on the yen following a series of warnings from Japanese Finance Minister Taro Aso that Tokyo would intervene to curb any excessive one-sided gains.
"With policy easing speculation gaining ground and the Finance Minister talking down the yen, it is clear they do not want a stronger currency," said Niels Christensen, FX strategist at Nordea.
Many analysts believe Japan will be wary of intervening before it hosts a Group of Seven meeting this month, even though Tokyo is unhappy with the yen's rise of more than 10% so far this year.
"For dollar/yen, it would appear that it is now caught in nervous range trade around 105 to 110," said Heng Koon How, senior currency strategist for Credit Suisse Private Banking Asia Pacific. "It is likely that Tokyo is still trying to build consensus and agreement on intervention both internationally and domestically."
The focus in Europe will be on "Super Thursday" as investors prepare for the Bank of England's monetary policy decision, its minutes, the quarterly Inflation Report and a press conference from Governor Mark Carney. With the Brexit debate raging, chances are the monetary policy committee could sound dovish and the Bank may downgrade growth forecasts.
The pound on the defensive as polls showed the vote on Britain's membership in the European Union on June 23 is still too close to call. It was down 0.2% at US$1.4415, not far from its two-week low of US$1.4375 touched on Monday.
The Norwegian crown was slightly higher before a Norges Bank rate decision at 0800 GMT. The bank is expected to keep rates unchanged, but with first-quarter growth data also due at the same time there is a chance that the numbers could show the Norwegian economy has stagnated.
"If the Norges signals more rate cuts for September, we could see the crown drop. The market is pricing in a 50/50 chance for a move in September," said Nordea's Christensen.